MINNEAPOLIS – General Mills, Inc. is looking to capitalize on what chief executive officer Jeffrey L. Harmening calls “a once-in-a-generation opportunity to drive trial” of the company’s brands. In the United States, which makes up 75% of the company’s sales, General Mills held or maintained share in 8 of its top 10 categories and the goal is to keep that growth.
“When you look at our US retail business, where we have the most robust data, not only are we attracting new consumers, but early signs indicate they’ve been satisfied with what they have tried and we are retaining them,” he said during a conference call with analysts on Sept. 22 to discuss first-quarter fiscal 2021 results. “Our repeat rates are higher than pre-pandemic levels in 9 of our top 10 categories in the US, and that’s true whether you’re talking about old buyers or buyers who are new to our brands.”
Strategies to keep some of the new consumers include capitalizing on past product renovation efforts focused on taste, nutrition and convenience. Mr. Harmening added that innovation initiatives are also important.
“We believe it’s important to maintain our innovation pressure throughout the pandemic and recession, so you’ll continue to see us launch new items over the course of fiscal 2021,” he said.
Finally, the company is continuing to invest in its e-commerce capabilities.
“…we know e-commerce purchases are extremely sticky, so we’re fueling e-commerce growth with compelling partnerships and activations,” Mr. Harmening said. “In Pet, we’re reaching out to first-time Blue e-commerce buyers to encourage them to transition to subscription-based purchases to help keep these new consumers in the Blue franchise. In China, we’re driving higher traffic to our shops by leveraging e-commerce for delivery and pickup.
“On our US retail business, we are leveraging past purchase data to reconnect with lapsed consumers, resulting in increased purchase frequency and household penetration gains. While we don’t expect to maintain all of the new consumers we’ve gained in the past six months, we’re confident that these actions will help us maximize the number of consumers we keep in the General Mills franchise, leading to stronger growth over the long term.”
Management hopes the efforts will help them generate earnings and sales on par with the first quarter of fiscal 2021, ended Aug. 30. Net income rose 23% to $638.9 million, equal to $1.04 per share on the common stock, and 21% over the same period of the previous year.
Quarterly sales rose 9% to $4.4 billion.
Sales for General Mills’ North American Retail Segment increased 14% to $2.7 billion, primarily reflecting increased at-home demand, according to the company. Within the business unit, US Meals & Baking sales rose 31%, US Cereal sales increased 10%, yogurt rose 5%, Canada improved 3% and US snacks sales fell 2%.
Given the uncertainty of market conditions, the North American Retail business unit has added approximately 30 new external manufacturers that are providing about 25% more external capacity.
“While this comes at a higher cost in our internal capacity, we still like the profitability of these sales even if they’re at a lower profit margin,” Mr. Harmening said. “And importantly, leveraging external capacity allows us to shed costs if we see demand moderate.”
General Mills’ Pet and international business units also saw sales rise during the quarter. In the Convenience & Foodservice segment sales declined 12% to $392 million.
Management declined to offer full-year guidance, but did provide thoughts on second- and fourth-quarter performance.
“We expect our North America Retail categories to grow in the high single-digit range, similar to the rate of growth we saw in August,” said Kofi A. Bruce, chief financial officer. “As we look further out, we expect net sales to be down in the fourth quarter, driven by the difficult comparison to year-ago period when net sales grew 21% behind the initial pandemic-driven surge in at-home demand, the 53rd week and the extra month of results in our pet segment.”
Mr. Harmening added the company plans to take “learnings” from the last recession and invest behind General Mills’ brands and growth ideas.
“In fiscal ‘21, we expect brand investments, including media and investments in capabilities like data and analytics, e-commerce and strategic revenue management, will be up year-over-year,” he said. “Finally, we continue to plan for ongoing health and safety expenses related to the pandemic. While these have moderated from the fourth quarter, we expect they will continue throughout fiscal 2021.”